Citi clears way for 34% govt ownership

June 09, 2009 16:08 IST

Citigroup's much-awaited $58-billion plan of converting preferred stock into common shares will happen this week, in move which will help the government to own about 34 per cent stake in the battered financial entity, a media report says.

"Citigroup Inc said its delayed plan to convert billions of dollars of preferred shares into common stock will occur this week, clearing the way for the government to own as much as 34 per cent of the struggling bank," The Wall Street Journal said.

The $58-billion conversion, announced in February when Citigroup shares were trading near USD 1, was supposed to happen in April but was slowed by negotiations between the bank and federal officials over details of the complicated transaction, the report noted.

The deal is aimed at reducing worries about Citigroup's capital levels. The company said last month it would expand the conversion to help plug the $5.5-billion capital hole found by the Federal Reserve in its stress tests of the nation's 19 largest banks.

Quoting Citigroup The WSJ said, it "appreciates the cooperation and support it has received from the federal banking regulators in connection with the exchange offers."

The government's stake could give Washington even more influence over Citigroup. Already, the Federal Deposit Insurance Corp is pushing for a shake-up of the management team led by Chief Executive Vikram Pandit, the report said citing government and bank officials.

Citigroup has not sought government officials permission to repay any of the $45 billion in taxpayer-funded capital it has received since last year, the daily said.